Well, so much for that.
Everybody was pretty excited about overnight reports that Donald Trump instructed his cabinet to draw up plans for a trade truce with China following what the President described as a “very long, very good” phone call with Xi Jinping.
So excited were markets, that the Hang Seng and the Kospi surged the most in seven years, spearheading a ridiculous rally across Asia which then spilled over into the European session.
We were hardly the only folks to suggest that market participants might want to curb their enthusiasm. After all, this was all predicated on a phone call involving Donald Trump as described on Twitter by that same Donald Trump and you know how that goes, right?
Additionally, the last time the U.S. struck a truce with China on trade, Trump was quick to renege at the first sign of a backlash from the protectionist contingent.
It thus comes as no surprise that Larry Kudlow told CNBC that contrary to reports, the President did not in fact tell his cabinet to draw up a truce to present to Xi at the G-20. Specifically, Kudlow said this:
There’s no massive movement to deal with China. We have already put out asks to China with respect to trade. We’re doing a normal, routine run-through of things that we’ve already put together and normal preparation. We’re not on the cusp of a deal.
That comes after a series of tweets from Eamon Javers, who essentially said the same thing. “Three senior administration officials [are] now telling me there is no indication of an imminent trade deal with China”, Javers tweeted on Friday, adding that while “options are always being discussed behind the scenes, [there is] no significant progress.”
Needless to say, none of that is what the market wanted to hear on Friday, and the reaction was predictable, with stocks diving to the lows of the day.
When CNBC asked Kudlow specifically whether Trump had asked anyone to craft a draft deal, Larry flatly said this:
One Trump official who is opposed to some of this: Trade Rep Bob Lighthizer.
He didn’t like the idea of pursuing a trade agreement with China at the G-20—and made his feelings known to others in the administration.
— Jennifer Jacobs (@JenniferJJacobs) November 2, 2018